brand logo

CSE braces for bloodbath despite new safeguards

09 May 2020

By Charindra Chandrasena
Stakeholders of the Colombo Stock Exchange (CSE) are bracing for a massive sell-off tomorrow when it opens after a seven-week shutdown, with foreign investors reported to be waiting anxiously to pull out of the market at the first opportunity.
However, the CSE will have two safeguards in place to minimise the damage. Firstly, there will be a significantly shortened trading period. The pre-open session will be from 10.30 a.m. to 11.00 a.m., the Open Auction will take place at 11.00 a.m. and Regular Trading will commence after the Open Auction at 11.00 a.m, before the market closes at 1.00 p.m. Secondly, the CSE will debut a new circuit breaker system which is set to stop the expected hemorrhaging if it gets out of hand. The Securities and Exchange Commission of Sri Lanka (SEC), which regulates the CSE, on 30 April, introduced a new system under which the market will automatically close for the day if the Standard and Poor’s Sri Lanka 20 (S&P SL20) index, which includes the 20 largest companies by total market capitalisation listed on the CSE, drops by 10% or more. In fact, the last day the CSE was open, 20 March 2020, it dropped by 11.72%, despite trading for less than half the usual period. Under the old system, trading was halted every time the S&P dropped 5%, with the market closing for the day if it dropped 5% at or after 2 p.m. The new system has done away with this 2 p.m. mark, allowing the market to be closed as early as 12 noon if the S&P drops 10% or more. The CSE in a letter on Thursday (7) told stakeholders to make necessary preparations as it “intends” to recommence trading tomorrow (11), as the Government has permitted the public and private sector entities to resume work from tomorrow onwards. At the time of writing, there has been no change to this decision by the Government, and if this remains unchanged today, the market is likely to experience one of its toughest days in recent times, according to stock market analysts. Market analysts point out that this prolonged closure has been harmful to investor confidence and may deter foreign investors in the future, as they will have no guarantees that they could pull their investment out when they wish to. In the days leading up to the initial closure of the CSE on 16 March, the CSE’s circuit breaker was activated multiple times after the S&P fell by 5% slabs several times, triggering 30-minute halts in regular trading. The following week, it remained closed for four days with the Government declaring holidays before being opened on Friday, 20 March. The CSE suffered a net foreign outflow worth a staggering Rs. 473 million in these five-and-a-half days. The curfew imposed in the evening on 20 March has made the CSE the stock market that has been closed for the longest period in the region due to Covid-19. In fact, only the Dhaka Stock Exchange in Bangladesh has been closed for a somewhat similar period, having shut its doors on 29 March. Despite many countries around the world being in a state of lockdown, the stock exchanges of these countries have generally been open for trading.

Kapruka

Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Automobile, Mother and Baby Products, Clothing, and Fashion. Additionally, Kapruka offers unique online services like Money Remittance, Astrology, Medicine Delivery, and access to over 700 Top Brands. Also If you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.Send love straight to their heart this Valentine's with our thoughtful gifts!

Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Automobile, Mother and Baby Products, Clothing, and Fashion. Additionally, Kapruka offers unique online services like Money Remittance, Astrology, Medicine Delivery, and access to over 700 Top Brands. Also If you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.Send love straight to their heart this Valentine's with our thoughtful gifts!


More News..